Credit rating of companies admitted to Tehran Stock Exchange

Document Type : Original Article

Authors

1 Corresponding author: Doctoral student of accounting department, Urmia branch, Islamic Azad University, Urmia, Iran

2 Associate Professor, Department of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran

3 Associate Professor, Department of Mathematics, Urmia Branch, Islamic Azad University, Urmia, Iran.: Email: Jafarian5594@yahoo.com

Abstract

The purpose of this research is credit rating of companies. For this purpose, in the first step, by studying the research literature and methodology of the top credit rating institutions, 10 variables that had the greatest impact on determining the credit quality of companies and are relevant in Iran's environment were used as the basis for credit rating. These variables are in two parts, quantitative and qualitative, all of which are quantified based on accounting information. Based on these variables, the information of 146 companies and 730 years of companies admitted to the stock exchange for the period of 2015 to 2019 were extracted for the credit rating of the companies from the data coverage super analysis model proposed by Hadi Vinche (2012). After that, the companies were placed in 9 categories using the K-means clustering method (Standard & Poor's 2021). To validate the model, the accuracy of the model was determined using the risk of default based on the leverage ratio of the total credit facility to the market value of the owners' rights. The result of the research included determining the credit rating of the investigated companies according to the selected indicators, each of which was assigned a rating from AAA to D. These ratings indicate the relative financial ability of companies to pay their debts on time. The closer the company's rating is to D, the lower the financial ability is, and the closer it is to AAA, the higher it is. The results show the selection of the influencing indicators in the credit rating and the correct determination of the credit rating.

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Budget and Finance Strategic Research
Volume 3, Issue 2 - Serial Number 10
Summer Quarterly
November 2022
Pages 33-60

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History

  • Receive Date: 24 June 2022
  • Revise Date: 26 July 2022
  • Accept Date: 07 November 2022

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